Newfoundland and Nova Scotia benefit from oil and natural gas
The Maritime provinces are increasingly a black gold coast
Canada’s Atlantic seaboard is turning out to be a refuge from global economic storms, thanks to oil and natural gas. Continuing exploration, production and development planning are keeping investment and employment afloat in the St. John’s region of Newfoundland and Labrador, and to a lesser but notable degree in the Halifax-Dartmouth area of Nova Scotia.
“That particular part of our country seems to be a little bit insular right now with some of the work that’s going on with Hebron, and the other things that are keeping things fairly buoyant in St. John’s, unlike some of the other regions of the country,” says Ian Way, vice-president of strategic planning and business development for ConocoPhillips Canada.
Premier Danny Williams highlighted Grand Banks growth prospects by making a politician’s dream of an announcement as he opened the 25th annual convention of the Newfoundland and Labrador Oil and Gas Industries Association (NOIA).
Williams unveiled a deal for the province to own 10 per cent of a $2-billion expansion project that will extend the life of the 22-year-old Hibernia production platform 300 kilometers east of St. John’s for decades. On top of earning a partner’s share in revenues, the province will collect royalties at rates as high as 50 per cent during peaks on the oil price cycle under the agreement with the offshore industry consortium led by Exxon Mobil Corp. Armed with forecasts done by global energy economics consulting firm PIRA, Williams predicted another $23 billion will flow into Newfoundland coffers from Hibernia before the oil reservoir runs dry, including $10 billion from the new addition.
Atlantic oil has been a revenue gusher for governments since Hibernia inaugurated Grand Banks production in 1997.
This January, cumulative output by the Hibernia, Terra Nova and White Rose platforms passed the one-billion-barrel mark. Total royalties collected to date top $5 billion. Last year, oil accounted for 33 per cent of the Newfoundland treasury’s revenues. The province has collected $3.9 billion from Hibernia so far despite a low royalty while the platform’s construction costs of more than $5 billion were recovered. Williams also announced that the payout period is over and the rate has jumped to 30 per cent of net revenues after production expenses.
In 2008 alone, Ottawa’s Hibernia receipts were $288.2 million. The federal government has earned $1.12 billion to date on the 8.5 per cent ownership that it bought to ensure construction of the production platform when its industry sponsors faltered during 1990s oil price lows.
Additional Grand Banks development is still on the horizon despite the global recession. While the National Energy Board has forecast a five-year delay, the Hebron proposal to build the fourth Grand Banks offshore oil platform is still afloat. By late 2013, more than 3,500 trades workers are forecast to start going into action at the Bull Arm offshore oil and gas fabrication site west of St. John’s on building a gravity base structure (GBS) or artificial island to tap the 1980s Hebron discovery 350 kilometers east of St. John’s. Production is scheduled to start in late 2017 and rise to a peak of 150,000 barrels a day within two years.
Since opening a St. John’s management office with a staff of 20 in the spring, Hebron project leader ExxonMobil has moved briskly on preparations. “We issued an expression of interest for our gravity base structure and front end engineering designs and, in addition to that, we’ve got our development plan,” says Hebron business manager Lynn Ann Nicholosi.
Natural Resources Minister Kathy Dunderdale predicts most of the Hebron work – of both the white- and blue-collar varieties – will be done in Newfoundland. “As a result of the world-class expertise developed at Hibernia, Terra Nova and White Rose, we are well positioned for the majority of the required fabrication and engineering.”
A current project confirms homegrown industry can do big jobs. The White Rose partnership of Husky Energy Inc. and Petro-Canada had huge modules made in bright safety yellow at Bull Arm by a local contractor called North Eastern Constructors Ltd. About 300 trades workers spent 12 months fabricating the equipment for a White Rose satellite oilfield called North Amethyst. In St. John’s, Husky Atlantic Canada operations manager Trevor Pritchard says in a distinctive Scottish accent, “It’s a great milestone.”
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